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Financial Results 3Q 2020
Message from the Executive Chairman of the Board
Covid-19 does not change Hera’s growth profile
Despite the current scenario deeply differs from that assumed in the Business Plan to 2023, Hera continues to follow the strategic design.
While investments and new business initiatives continue, a careful approach to gain efficiency at organic level and extract value in the integration process of acquired companies allows Hera to post a 2.6% growth at EBITDA level.
Strong cash generation succeeds in covering investments and dividend payment, while the Debt-to-EBITDA ratio continues to improve, declining to 2.97x at the end of September 2020.
Maintaining the focus on executing the Business Plan’s guidelines remains the priority, also to handle the scenario of the upcoming weeks given a new wave of the pandemic – the fourth quarter has indeed a substantial weight on full-year EBITDA, especially in the gas sale business, where the newly-consolidated EstEnergy can provide a relevant contribution.
Tomaso Tommasi di Vignano
Dear Shareholders,
the results of the first nine months of 2020 prove that Hera not only successfully addressed the challenges imposed by Covid-19, but also effectively executed its Business Plan.
Investments and business initiatives continue
The results that we present today show the benefits of the integration of EstEnergy, with the significant boost it has produced on growth at a consolidated level. In recent months, we have continued to invest in our assets, despite the restrictions imposed to contain the spread of the virus: gross operating investments amounted to 333.6 m€, with a slight decrease of 2.8% compared to the same period in 2019. We also strengthened the partnership started last December with Ascopiave, by acquiring a 4.9% share of the Company’s capital. The extremely attractive price levels reached by Hera’s shares prompted us to think that investing in our stock was one of the investments with the best perspective return: we therefore increased the amount of treasury shares through a financial investment of approximately 25 m€.
In this last quarter, with the end of last spring’s severe lockdown, we launched a series of new business initiatives; we signed a partnership with Maire Tecnimont that gives us access to cutting-edge technologies in the regeneration of rigid plastic materials and widened our offer of integrated corporate services, through the new formula of Hera Business Solutions.
Sustainability translates into real actions to support the most vulnerable stakeholders
Sustainability, which is integrated in our strategic approach, has been really put into practice across all dimensions, not just the economic one, with an increasing attention to the model of circular economy and an authentic and material support offered to the most vulnerable stakeholders in the new context generated by the pandemic.
Data show a progress in all key performance indicators
The nine-month 2020 financials that we present therefore represent a further step towards the 2023 Business Plan’s targets, both in terms of EBITDA, up by 2.6%, and in terms of Net Profit, where we have achieved an improvement of 1.1%. Strong cash generation allowed us to fully fund operating and financial investments, in addition to the payment of the dividend of 10 euro cents per share. Excess cash flow drove the decrease of the Debt-to-EBITDA ratio down to 2.97 times; therefore, we can still count on the financial flexibility needed to afford any further investment opportunities that might arise in the market and has not been included in the Plan.
The increase of 20.4 million euro at EBITDA level in first nine months of the year has been driven by a contribution from organic growth and M&A that exceeds 60 million euro…
If we look at the factors that fuelled the 20.4 m€ growth in EBITDA, it is clear that the most significant positive contribution came from M&A, with 35.5 m€, of which 30.7 m€ related to EstEnergy and 4.8 m€ to Pistoia Ambiente. Even the progress in terms of organic growth, equal to 25.1 m€, proved to be substantial. Such increase confirms the effectiveness of the actions taken to reduce costs, through the internalisation of some activities, as well as the greater efficiency achieved through digitization and the use of Artificial Intelligence.
It is thus possible to absorb negative impacts of over 40 million euro
Overall, these positive factors largely offset the impact of 40.2 m€ of lower EBITDA due to a number of negative factors: the effects of the lockdown, mild winter temperatures and the end of incentives on a WTE plant.
The resilience of the Networks and the impulse of Energy proved to be essential
If we look at the breakdown of the business portfolio, even in the new scenario affected by the pandemic, we realize that we could count on the confirmed resilience of the Networks, the brilliant operational performance of the Energy offer, leveraging on the extraction of value from the integration of EstEnergy, and, last but not least, on the solidity shown in waste treatment.
Working on the new Plan while remaining focused on managing the fourth quarter in the best possible way
At Hera, we are therefore facing this last quarter of 2020, with the second wave of contagion that has led to tightening restrictions in several Italian regions, while being confident that we are adequately structured and focused to achieve the committed targets. In these weeks we are working to update the Business Plan that will guide us towards the 2024 horizon. We expect to present it to you as usual in January.
The likely persistence of Covid-19 in 2021, the higher complexity in liberalised markets, and the increasing efficiency required in regulated businesses are all scenario factors that pose important challenges to us.
“We want to turn these challenges into opportunities, leveraging on a proven business model and a long-term strategic approach that continues to steer us in the right direction.”